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Indianapolis’ largest independent physician group, American Health Network, doesn’t want to sell to a hospital, but its CEO hopes it can hold on until the remainder of the health reform law kicks in.

Dr. Ben Park said the wave of physician acquisitions the past three years has given area hospitals a new stream of revenue—and therefore the cash to recruit even more physicians. American Health is finding it difficult to match the pay offered by hospitals.

One Indianapolis-area hospital promised $1 million per year in compensation to lure cardiac surgeons, according to an August report by the Center for Studying Health System Change.

American Health doesn’t employ cardiologists, but its bevy of primary care and cancer doctors is still attractive to hospitals that want to lock in a stream of patient referrals from physician offices into the beds and operating rooms they need to fill every day.

American Health lost a group of eight family physicians this summer to Noblesville-based Riverview Hospital and faces similar threats from other hospitals more or less constantly.

As he discusses in the video below, Park is pinning his hopes on accountable care, a key provision of the 2010 health care law, under which the federal Medicare program would reward physicians for keeping patients healthier and therefore needing fewer trips to the hospital. Private health insurers, such as Indianapolis-based WellPoint Inc., are rolling out similar plans in their markets.

“Accountable care really is the savior of primary care organizations and physician groups in general,” Park said, adding, “Economically, the way it works is, you go to the hospital and you take a dollar of savings from them, and you put 50 cents in your pocket and you give the other 50 cents back to Medicare.”

But until accountable care gains traction, Park said, hospitals are getting a bump in revenue. That comes from locking in physician referrals to the hospitals’ facilities. Also, many health plans pay hospital-owned facilities higher rates for ancillary services—blood tests, X-rays, etc.—than they do when those same services are performed in physician-owned facilities.

“Right now hospitals receive a lot more money for the services they provide in terms of ancillaries than what we do. The hospitals essentially utilize that differential to employ physicians,” Park said.

Indeed, Community Health Network has added more than 350 physicians to its stable in the past three years. St. Vincent Health acquired the 130-physician Care Group, in 2010. Indiana University Health has roughly 600 physicians on its payroll now and recently squabbled with Franciscan St. Francis Health over a couple of family doctors in Martinsville.

Some hospital executives acknowledge that the consolidation trend has driven up costs, but they say that budgetary constraints and accountable care will almost certainly curtail their revenue soon.

“There probably was an uptick in the costs as a result of that [consolidation], but that's not sustainable,” said Kevin Speer, chief strategy officer of St. Vincent, during the IBJ Health Care Power Breakfast on Sept. 21. But, he said, the advantage of consolidation is that it will help hospitals and doctors coordinate care, reduce unnecessary and duplicative services, and make prices more transparent. “So I think the cost savings will be realized. I doubt they're being realized today. But in 24 months if we're sitting up here and we haven't realized them something's wrong.”

Wall's career as a journalist was set in fifth grade, when he took on an afternoon paper route for The Indianapolis News. He admits to being a terrible paperboy because instead of delivering the newspaper right away, he would sit and read it for hours. He may have lost some customers, but he never lost the bug for news. A lifelong resident of central Indiana, Wall grew up in Sheridan—the one spot in Hamilton County untouched by suburbia. After graduating from DePauw University in Greencastle, he joined The Indianapolis Star as a business reporting intern and refused to leave until he had a full-time job. Wall stayed there five years before joining IBJ in February 2007. Wall and his wife now live in Indianapolis with their two sons. When not at the office, the Walls spend time with their extended family and worship at Christ Church Reformed Presbyterian in Brownsburg.

all’s career as a journalist was set in fifth grade, when he took on an afternoon paper route for The Indianapolis News. He admits to being a terrible paperboy because instead of delivering the newspaper right away, he would sit and read it for hours. He may have lost some customers, but he never lost the bug for news. A lifelong resident of central Indiana, Wall grew up in Sheridan—the one spot in Hamilton County untouched by suburbia. After graduating from DePauw University in Greencastle, he joined The Indianapolis Star as a business reporting intern and refused to leave until he had a full-time job. Wall stayed there five years before joining IBJ in February 2007. Wall and his wife now live in Indianapolis with their two sons. When not at the office, the Walls spend time with their extended family and worship at Christ Church Reformed Presbyterian in Brownsburg

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On Tuesday, April 24 IBJ & Indiana University will host Education-to-Employment (E2E) Convergence, a panel discussion focused on how Indiana can build a talent strategy around a more highly educated workforce. E2E will identify examples of successful partnerships to better integrate college graduates into our workforce from around the state. Register today.